Alexandra Klass is the James G. Degnan Professor of Law at the University of Michigan Law School; Josh Macey is an Assistant Professor of Law at the University of Chicago Law School; Shelley Welton is the Presidential Distinguished Professor of Law and Energy Policy at the Kleinman Center and the University of Pennsylvania Carey Law School; Hannah Wiseman is a Professor of Law at Penn State Law and the College of Earth and Mineral Sciences.

After every extreme weather event, Republicans warn of the threats that renewable energy and clean energy policies pose to grid reliability. In a sense, these commentators are right—the U.S. grid is under immense strain, and if policymakers do not intervene quickly and decisively, reliability challenges will continue to worsen. But they are wrong to blame renewable energy.

The real problemlies in the grid's outdated and fragmented governance system. Our electricity system is operated by numerous participants—many deeply influenced by traditional fossil fuel power generators—who often ignore each other's regulatory goals and design energy market rules to protect their own economic interests. As we argue in our recent white paper, reliability rules should be designed, implemented, and enforced by regulators and market participants representing all stakeholders, not just by utility companies that stand to lose the most in the clean energy transition.

Clean energy critics largely ignore the evidence about the root causes of reliability failures. No single generation resource provides perfect reliability. While wind turbines without cold-weather retrofits sometimes freeze during cold snaps, wind and solar power have sometimes outperformed expectations during extreme weather. Natural gas generation, and to a lesser extent coal, has sometimes helped keep the lights on but has failed to meet reliability commitments in other cases. This record suggests we need a deeper, more nuanced discussion about the real threats to grid reliability and their solutions.

Two major governance challenges

The grid faces two governance problems. First, the current regulatory framework treats reliability and decarbonization as independent goals. Different energy regulators—such as the Federal Energy Regulatory Commission (FERC), the North American Electric Reliability Corporation (NERC), state public utility commissions, and regional grid operators—each oversee certain dimensions of grid reliability. These entities occasionally cooperate to develop reliability rules, but more often they operate in silos. As a result, when clean energy resources attempt to enter the market in response to clean energy subsidies, they often encounter technical and outdated reliability and market rules that hinder their entry or operation, ironically making the grid less reliable.

Second, the entities responsible for overseeing grid reliability are private organizations deeply influenced by traditional utility companies, many of which face financial losses in the clean energy transition. In theory, FERC should cooperate with other regulators to ensure that electricity market and planning rules align with other regulatory goals such as reliability and clean energy policy. This means reforming resource adequacy markets to address the growing need for flexible resources that can ramp up quickly when renewable energy is unavailable; and redesigning transmission planning to encourage the construction of more high-voltage transmission lines, enhancing reliability through interregional power transfers.

In reality, however, FERC has outsourced market design decisions to for-profit and non-profit entities. In most of the United States, resource adequacy markets and transmission planning are handled by Regional Transmission Organizations (RTOs), which are private, non-profit, membership-based institutions. Although FERC has safeguards to ensure their independence, traditional utility companies have significant formal and informal influence in these organizations' decision-making processes. It is therefore unsurprising that regional rules often favor the financial interests of utilities.

The case of transmission planning

Take transmission planning as an example. The best wind and solar resources are far from the load centers that consume large amounts of electricity. To bring these resources to market, the U.S. needs to double its transmission capacity. Interregional transmission capability is also one of the best ways to ensure reliability in the face of increasingly frequent weather disasters. Yet the U.S. has failed to build a robust, nationally interconnected transmission network. Over the past decade, most new lines built have been small, local lines that address only immediate reliability concerns and benefit only a single utility's service area.

From a policy perspective, this is simply irrational. But it is entirely consistent with our misaligned and fragmented energy governance system. When utilities build local lines, they do not have to compete with utilities in other regions or merchant (competitive) transmission providers. Small transmission projects also benefit vertically integrated utilities (i.e., companies that own both generation and transmission assets) because local lines do not expose their generation resources to broader market competition. But only utility shareholders benefit from this arrangement; the public and a large number of potential new competitors lose out.

Another example of private interest dominance

Another example of private interest dominance in reliability governance is that utilities with significant influence over RTOs also have a strong voice in the committees within NERC that propose reliability standards, which ultimately require FERC approval. Like RTOs, NERC is a private non-profit corporation, and its voting members tend to favor reliability standards that support continued reliance on baseload fossil fuel resources—resources that need to operate around the clock.

These challenges may seem esoteric—indeed, their process-heavy and acronym-laden nature itself discourages public participation. But it is crucial that energy regulators focus on technical reforms that will enable electricity markets to accommodate high levels of renewable energy, as well as flexible resources that enhance the reliability of renewables, such as increased battery storage, demand response, and microgrids.

More importantly, they should first address the fundamental governance issues that create unnecessary tension between clean energy and reliability.

At a minimum, NERC and RTO governance processes and boards should include more public representatives. FERC should convene all entities responsible for grid reliability more regularly to break down current regulatory silos. More ambitiously, Congress should consider centralizing core responsibility for grid reliability in FERC, rather than continuing to rely on private membership organizations beholden to traditional utility and fossil fuel interests.

These governance reforms would lay the foundation for building a more reliable grid that meets public goals at the lowest cost.